Neutral Citation Number: [2009] EWHC 90145 (Costs)
Claim No: 7DD04371
IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

Clifford’s Inn, Fetter Lane
London, EC4A 1DQ

Date:  18 June 2009 

Before :

MASTER WRIGHT, COSTS JUDGE
(Sitting as a Deputy District Judge of the Stourbridge County Court)
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Between :

	RITA TRANTER	Claimant	
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	HANSONS (WORDSLEY) LIMITED	Defendant	

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Mr Robert Marven (instructed by Nash & Co) for the Claimant
Mr James Baird (instructed by McCullagh & Co) for the Defendant

Hearing date: 28 April 2009

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Judgment

Master Wright: 

1.	The background to this matter is succinctly described in the narrative to the Claimant’s bill of costs.    On 23 March 2005 the Claimant was travelling on a bus owned by the Defendant.   The driver suddenly reversed and then shot forward causing the Claimant to be thrown forward.   The Claimant hit the base of her neck on a post in the bus and also sustained bruising of the right calf. 
2.	On 1 April 2005 the Claimant’s solicitors took initial instructions and discussed insurance and all other funding options with her and considered that funding by way of a conditional fee agreement (with after the event legal expenses insurance) was appropriate.   A conditional fee agreement (with after the event legal expenses insurance) was entered into on 14 April 2005. 
3.	A letter of claim was served upon the Defendant on 20 April 2005.   Liability was initially denied and eventually conceded on 30 April 2007, outside the personal injury pre-action protocol period. 
4.	The Claimant’s medical records were obtained and several medical reports were prepared by Mr Reece on 10 November 2005, 5 February 2006 and 4 May 2006. 
5.	Further medical reports were obtained from Mr Butt, consultant orthopaedic shoulder specialist on 5 February 2007, 24 April 2007 and 8 May 2007.   An interim care schedule and schedule of special damages were then prepared. 
6.	Disclosure ensued and the Defendant made a Part 36 offer in the sum of £6,000.    Proceedings were issued on 30 October 2007.    The Claimant rejected the Defendant’s offer and on 14 December 2007 made a counter offer in the sum of £14,000.   Negotiations ensued and on 21 December 2007 the Claimant accepted an offer in the sum of £10,000 with costs to be assessed if not agreed.   The Consent Order was made on 18 January 2008. 
7.	The Claimant commenced detailed assessment proceedings on 30 June 2008.   Points of Dispute and Replies were served and the Claimant requested a detailed assessment hearing on 4 August 2008.  By a further Consent Order dated 16 December 2008 the detailed assessment was transferred to the Supreme Court Costs Office.
8.	In the Points of Dispute the Defendant says, under the heading “General Point 1 CFA Enforceability – BTE Cover”: 
“The receiving party seeks recovery of costs incurred under the terms of a conditional fee agreement.
The receiving party is requested to provide a copy of the conditional fee agreement upon which she relies in order that the paying party and the court can be satisfied as to the extent of the rights and obligations thereunder. 
The paying party requests confirmation of the identity and the level of qualification of the individual who provided the oral explanation as required by Regulation 4 of the Conditional Fee Agreement Regulations 2000, the date that explanation was given and a copy of the written notification of the explanation as required by the Regulations. 
The paying party understands that legal expenses cover was available to the receiving party under the motor policy of the vehicle in which she was travelling at the time of the accident.    The legal expenses cover was provided on the policy with DAS Insurance and it was confirmed by the receiving party in a telephone call on 27 February 2008. 
On the information currently available it appears that the receiving party’s solicitors were not aware of this cover, and therefore a genuine issue arises as to whether proper consideration was given to the availability of pre existing legal expenses cover in accordance with Regulation 4-2(c) of the CFA Regulations 2000 before entering into the CFA.   The Court will be requested to consider in detail the Conditional Fee Agreement relied upon by the receiving party, together with the oral explanation note/attendance note relied upon by the receiving party’s solicitors.   Notwithstanding the guidance in Garrett v Halton Borough Council and Myatt and Ors v National Coal Board [2006] EWCA Civ 1017 and also Sarwar v Alam [2001] EWCA Civ 1401 (which is likely to have been in the solicitor’s mind at the time of considering these matters), the failure to identify the cover implies that the consideration was insufficient and that there has been a breach of the regulations with a materially adverse effect upon the protection afforded to the Claimant.
As a consequence the agreement is not enforceable between solicitor and client within the provisions of Section 58 of the Courts & Legal Services Act 1990 (as amended by the Access to Justice Act 1999) and consequently costs are not recoverable between the parties pursuant to the indemnity principle.  
The paying party will refer the Court to the judgments in the following cases: 
The Accident Group Test Cases – Sharratt v London Central Bus Company Ltd 
Samonini v London General Transport Services Ltd (Senior Costs Judge Master Hurst [2005] EWHC 90001 (Costs)
Sarwar v Alam [2001] EWCA Civ 1401 
Culshaw v Goodliffe [unreported HHJ Stewart QC 24 Nov 2003] 
Adair v Cullen [unreported HHJ Holman 14 Jun 2004] 
Hollins v Russell [2003] EWCA Civ 718 
Garrett v Halton Borough Council and Myatt and Ors v National Coal Board [2006] EWCA Civ 1017”
9.	In the Reply the Claimant says that a copy of the conditional fee agreement had been supplied.  The Reply goes on to say that oral advice was undertaken on 1 April 2005 by Sara Aitcheson of Mason & Co (the Claimant’s then solicitors) and also by Roberta Mason on 14 April 2005 prior to signing the conditional fee agreement. 
10.	In response to the request for a copy of the written notification of the explanation, the Reply says that the Defendant is not entitled to such documentation.  The Reply says: 
“The bill of costs has been certified as being accurate and therefore the paying party must raise a genuine issue in order to look behind the certifications on the bill.   Hazlett v Sefton Metropolitan Borough Council.   The Defendant has failed to raise a genuine issue.”
11.	The Reply then says: 
“At the time the CFA was entered into investigations took place into whether the Claimant had any legal expenses insurance which would have covered this claim.
The Claimant was a passenger on the Defendant’s bus when on 23rd [January] 2005 she was injured. 
It is accepted that Mason & Co did not make any enquiries into LEI from the Defendant before executing the CFA dated 14th April 2005. 
Regulation 4(2)(c) required a solicitor to “inform” a client “whether [she] considers that the client’s risk of incurring liability for costs … is insured against under an existing contract of insurance”.
The Claimant relies on Dole v ECT Recycling Limited (SCCO 17th September 2007) in which Master Rogers held that the CFA was enforceable. 
In Dole the Claimant’s uncontradicted evidence was that at the time that the CFA was executed (July 2004) it was not common knowledge that buses had BTE insurance.  The evidence was that this only became common knowledge in 2005 and that the point was first highlighted in December 2005 in Robinson v Doselle.
The Claimant submits that there is evidence on this file that the Claimant’s solicitor was not aware that Ensign operated a separate policy of legal expenses insurance for passengers. 
The CFA in this matter was dated 14 April 2005 prior to the first highlighted point in Robinson v Doselle. 
The majority of cases relied upon by the Defendant relate to adequate funding enquiries of the Claimant not funding enquires upon the Defendant’s insurance. 
The Claimant maintains that at the time the CFA in this case was executed, solicitors did not know enough to put them on notice that a Defendant bus company might have LEI covering passengers’ claims.”
12.	The hearing of the detailed assessment of the Claimant’s bill of costs was fixed to be heard by me sitting as a Deputy District Judge of the Stourbridge County Court on Tuesday 28 April 2009.    On 16 December 2008 a witness statement was made by Roberta Mason of Mason & Co who were the Claimant’s solicitors at the relevant time.   In it she says that she was the solicitor acting for the Claimant in this matter.  She says: 
“3.	I confirm that I have specialised in personal injury cases since 1995.   Most of the personal injury cases I deal with are funded by way of conditional fee agreements.  I am extremely familiar with the CFA Regulations and the practice relating thereto.   I confirm that as at the date when the CFA was signed in this case (14.04.05) and based on my experience in the personal injury field, it was not common knowledge in the industry that a bus company would have applied Legal Expenses Insurance to the passengers on a bus to sue itself. 
4.		After the CFA was entered into and a letter of claim was sent I received a letter from Ensign on 17 May 2005 which indicated that there was legal expenses insurance.    On the information contained within that letter I believed that there would have been a conflict of interest to use the Defendant’s legal expenses insurance. 
5.		In the circumstances I believe that I complied with Regulation 4 in this matter and as the Claimant did not have any legal expenses insurance that I was justified in obtaining after the event legal expenses insurance.”
13.	On 23 April 2009 a Witness Statement was made by Richard Albert Jones.    In the Statement he says that he is employed as a Claims Handler by QBE Insurance (Europe) Ltd (previously Ensign Motor Policies at Lloyds) the Defendant’s motor insurer. 
14.	Mr Jones says at paragraph 3: 
“I make this statement to assist the court upon the detailed assessment hearing on 28 April 2009 in support of the Defendant’s submission that the Defendant’s motor policy includes Before the Event Legal Expenses Insurance that was available to the Claimant at the time of the accident and that such existed without a conflict arising.”
15.	Mr Jones exhibits to his Witness Statement a copy of the policy terms and conditions booklet for the policy held by the Defendant that was in force at the time of the accident.   He says that the policy includes Before the Event Legal Expenses Insurance (“BTE”) that extends to passengers and that although that cover is included in the motor policy, it is not provided by Ensign.    It is provided by DAS Legal Expenses Insurance Company.   He says that the DAS BTE insurance cover could be described as a “bolt on” on the Ensign policy.  
16.	He refers to Section 4 of the booklet which sets out the BTE cover and which defines “Insured Person” as “The Document Holder and any passenger or driver who is in or on the Insured Vehicle with the Document Holder’s permission”.   Anyone claiming under Section 4 “must have the Document Holder’s agreement to claim”.
17.	Mr Jones goes on to say: 
“8.	Ensign Motor Policies has no control or influence over the BTE policy, which is entirely dealt with by DAS.   DAS are entirely and transparently independent of Ensign.    Ensign does not correspond with DAS in relation to any of the claims being managed by them.   The claims are dealt with by DAS and the Claimant’s appointed solicitors in their entirety.   The DAS policy allows a Claimant a freedom of choice of solicitor after proceedings are issued and I understand that in larger cases that some freedom is granted prior to issue.   In any event, the cases administered to by DAS are administered independently of Ensign.
9.		Therefore, no conflict of interest arises and the BTE is available for use even against Ensign policy holders.   The BTE policy will have been available for the Claimant on this occasion to use in pursuing [his] claim against the Defendant.”
18.	The Defendant’s contention that the Claimant’s solicitors were in breach of Regulation 4-2(c) of the Conditional Fee Agreement Regulations 2000 and that as a consequence the conditional fee agreement dated 14 April 2005 is not enforceable was heard first at the detailed assessment hearing. 
19.	Section 58 of the Courts and Legal Services Act 1990 (as amended) provides (so far as is relevant): 
“58(1)	A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to sub-section (5)) any other conditional fee agreement shall be unenforceable. 
(3)	The following conditions are applicable to every conditional fee agreement – 
(a)	it must be in writing; 
(b)	it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement;  and 
(c)	it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.”
20.	Regulation 4 of the Conditional Fee Agreements Regulations 2000 provides (so far as relevant): 
“4(1)	Before a conditional fee agreement is made the legal representative must – 
(a)	inform the client about the following matters, and 
(b)	if the client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require.
(2)	Those matters are – 
(a)	the circumstances in which the client may be liable to pay the costs of the legal representative in accordance with the agreement, 
(b)	the circumstances in which the client may seek assessment of the fees and expenses of the legal representative and the procedure for doing so, 
(c)	whether the legal representative considers that the client’s risk of incurring liability for costs in respect of the proceedings to which the agreement relates is insured against under an existing contract of insurance, 
(d)	whether other methods of financing those costs are available, and, if so, how they apply to the client and the proceedings in question, 
(e)	whether the legal representative considers that any particular method or methods of financing any or all of those costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract – 
(i)	his reasons for doing so, and 
(ii)	whether he has an interest in doing so.”
21.	At the hearing I was referred to a number of decisions of persuasive but not binding authority where the injured claimant had been a passenger on a bus but whose costs following a successful claim had been disallowed because of a breach (as found by the court) of Regulation 4(2)(c). 
22.	In Martha Cochrane v Chauffeurs of Birmingham Master Gordon-Saker (sitting as a Deputy District Judge of the Central London County Court) found that the Claimant’s solicitors had failed to satisfy the requirements of Regulation 4(2)(c).   
23.	The Claimant was a passenger on a mini bus operated by the Defendant when she was injured in an accident.   Solicitors acted for her and entered into a conditional fee agreement with her on 11 November 2004.  The proceedings were settled and by an order of the Central London County Court dated 28 February 2006 the Defendant agreed to pay the sum of £4,600 to the Claimant plus costs. 
24.	In the detailed assessment of those costs the Defendant contended that the Claimant’s solicitors had failed to comply with Regulations 4(2)(c) and 4(2)(d) because the Defendant’s own insurance policy would have provided the Claimant with cover in relation to her claim and no enquiry was made by the Claimant’s solicitors as to the existence of that cover. 
25.	After considering the terms of the Defendant’s insurance policy and paragraphs 55 and 62 of the judgment of Dyson LJ in Garrett v Halton Borough Council and Myatt & Ors v National Coal Board, Master Gordon-Saker said: 
“11.	I take that to mean that to comply with the regulation a solicitor must take reasonable steps to ascertain the true insurance position so as to enable him to inform the client of the matters set out in Regulation 4.2(c) and 4(2)(d).  It seems to me it is common knowledge that motor insurance policies often contain legal expenses insurance cover and that such cover often extends to claims by passengers of the insured driver.”
26.	Master Gordon-Saker went on to consider the judgment of Lord Phillips MR in Sarwar v Alam (a case to which the Regulations do not apply) where he said at paragraph 58: 
“On the other hand we accept Mr Drabble’s submission that representation arranged by the insurer of the opposing party pursuant to a policy to which the claimant had never been a party, and of which he/she had no knowledge at the time it was entered into, and where the opposing insurer through its chosen representative reserves to itself the full conduct and control of the claim, is not a reasonable alternative.” 
27.	After referring to the submissions of counsel about the differences between the Defendant’s insurance policy and the policy in Sarwar Master Gordon-Saker said: 
“16.	It seems to me that the issue here is not whether Mrs Cochrane could have or should have availed herself of the cover provided by DAS, but whether her solicitors fulfilled their obligation to take reasonable steps to ascertain the true insurance position so that they could inform her of the matters required by the regulations.  We do not know what would have happened had the DAS policy been discovered.  Mrs Cochrane may have decided to avail herself of it, or she may not.  Had she availed herself of it, then she would have been faced with the limitations of the policy which Mr Byrne has identified.   In not availing herself of the policy she did incur exposure to significant risks.  By entering into the conditional fee agreement she assumed a liability to pay a success fee of 5 per cent which would not be recoverable from the defendant.  She did not take out after the event insurance, so she was exposed to a risk that in the event of an adverse costs order, perhaps following a Part 36 payment, she would have been liable to pay costs to the defendant.  Similarly, she would have been exposed to liability to pay her own solicitor’s base costs in the event that she failed to meet a Part 36 payment.
17.	These factors have to be considered with the benefit of competent and appropriate legal advice.  Before that advice can be given the solicitors have to ascertain the true position.  In my judgment, in this case, by failing to enquire of the defendant as to whether the policy provided legal expenses insurance for passengers Mrs Cochrane’s solicitors failed to comply with either Regulation 4.2(c) or Regulation 4.2(d).
18.	Insofar as Mrs Cochrane was then denied the opportunity of considering whether she wished to use the DAS policy, subject to the defendant’s consent, or wished to bring this claim under a conditional fee agreement the breach of the regulations was material.  The regulations failed to provide her with the appropriate protection.
19.	Accordingly, it seems to me that there is no liability on the part of Mrs Cochrane to pay her solicitor’s profit costs.  Accordingly, she cannot recover those costs from the defendant.”
28.	Master Gordon-Saker’s decision in that case was upheld on appeal by His Honour Judge Lindsay QC, sitting in the Central London County Court on 22 June 2007 
29.	I was referred to the judgment of District Judge Harrison given in the Huddersfield County Court on 11 June 2007 in the case of Gillian Donaldson v Four Square Coach Company.   The Claimant had been a passenger in a coach when she was injured in a road traffic accident on 17 April 2003.    She entered into a conditional fee agreement with her solicitors.    Proceedings were commenced on 24 March 2006 and a payment into court in the sum of £11,000 was accepted on 22 May 2006. 
30.	On detailed assessment of the Claimant’s costs the Defendant’s case was that it had a policy of legal expenses insurance which could have been available to the Claimant and that the Claimant’s solicitor should have enquired as to whether the policy was available to his client.   In his judgment the Judge found that the Claimant’s solicitor, a Mr Sparrow, knew that such cover was likely to exist because in his experience it almost always does exist in respect of bus or coach company insurance – but he did not specifically ask about it nor, in fact, did the Defendants raise the issue until after the costs proceedings were underway. 
31.	He said in his judgment: 
“14.	The question for me is not whether this Claimant could have, or should have taken the BTE insurance which was available to her.    Quite likely she ought not to have done.   It would have been a sensible decision for the solicitor to have advised the rejection of that insurance.   Of course, it would have been open to the individual client to have rejected that advice.   Certainly a possibility that she would have done so and gone for the BTE insurance, but I suppose highly unlikely that she would have done so.
15.	However, the question for me is whether the Claimant’s solicitor, Mr Sparrow, complied with the requirements of the regulations.    It seems to me that he did not.   He certainly had it in mind that there could be BTE insurance.   I take the view that his duty under the regulations was to make an enquiry about it.   It would have taken merely a letter or two, first of all to ask whether such insurance existed and, secondly, if it did, to ask for its terms.”
32.	The Judge concluded that the Regulations had not been complied with, that the Claimant had no liability to pay her solicitor’s profit costs and, therefore, could not recover those profit costs from the Defendant. 
33.	I was referred to the judgment of District Judge Hickman in Lorna Robinson v Alan Doselle heard in the Milton Keynes County Court and dated 19 December 2005.
34.	On 15 March 2004 Mrs Robinson was a passenger on a bus operated by M K Metro.   She was injured when the bus was struck by a lorry driven by the Defendant.  Her claim for damages was compromised in a sum of £3,250.   However the Defendant refused to pay the Claimant’s costs because it was alleged (and the court assumed) that BTE cover was available to the Claimant under the motor insurance policy which had been taken out by M K Metro.   The Defendant contended that the Claimant’s solicitor should have enquired of M K Metro whether it had a policy which would be available to the Claimant. 
35.	The Judge found that the Claimant’s solicitor should have made that enquiry.   He said: 
“The Court of Appeal in Sarwar v Alam set out clear and straightforward principles, and while these principles do not amount to an inflexible code, they do amount to a guide to sensible practice.   Litigators are plainly put on notice by Sarwar v Alam that motor policies commonly contain LEI cover available for the benefit of passengers.   In this case Mr Piggott could easily have asked M K Metro.   To do so would not have been to “embark on a treasure hunt”.   It would have involved the writing of one letter. 
It is conceivable that if he had made that enquiry, features of the policy would have made it unacceptable or one which it was reasonable for Mrs Robinson to reject.    But that cannot avail Fennemores.   This is a standard basis assessment and the benefit of any doubt must go to the paying party.”
36.	Finally, (among the cases of persuasive rather than binding authority to which I was referred) I was referred to the judgment of Master Rogers (sitting as a Deputy District Judge of the Uxbridge County Court) in the case of Mrs Kirpal Kauer Dole v ECT Recycling Ltd dated 17 September 2007.   
37.	The Claimant sustained personal injuries on 23 May 2004 when travelling as a passenger on a bus operated by the Defendant.   The matter was settled without proceedings on 13 February 2006 in the sum of £15,000 plus costs.   The costs could not be agreed and costs only proceedings were issued.    The Defendant contended that the Claimant had been informed by its insurers Ensign by letter dated 8 December 2004 that as a passenger on one of its buses it had the benefit of BTE insurance.   It submitted that by failing to advise the Claimant of the possibility of her taking advantage of the BTE insurance and by instead entering into a conditional fee agreement with the Claimant and an ATE policy on 15 July 2004 the Claimant’s solicitors had failed to comply with their obligation under Regulation 4(2)(c). 
38.	A witness statement was made by Mr Gary Bennett a senior partner in the Claimant’s solicitors’ firm in which he said: 
“2.	I have specialised in personal injury cases since approximately 1998.   Most cases are funded by way of conditional fee agreements.   I am extremely familiar with the Regulations and practice relating thereto.   I confirm that as at the date when the CFA was signed in this case (15/07/2004) it was not common knowledge that the bus companies would have been covered by Before the Event Legal Expenses insurance which would have been available for passengers to sue the bus company for the negligent driving of its own drivers. 
3.		The fact that bus companies may have BTE insurance which would extend to passengers only became well known at some point at 2005 which was after the Defendants had informed the firm in this particular case that BTE cover was available which they only informed the firm in their letter of 8.12.2004.  The firm has never been provided with a copy of the policy in any event.
4.		The first case which highlighted the point that bus companies can have this form of insurance was the case of Robinson v Doselle which was not until December 2005.    When my firm became aware of the existence of this kind of policy in “bus accident cases” it of course became a standard enquiry to make of the defendants when being first instructed by a Claimant who had been injured as a passenger on a bus. 
5.		Back in July 2004 the idea that a bus company would have applied legal expenses insurance to the passengers on a bus to sue itself would have seemed unlikely to say the least.   Very few would have considered enquiring of the bus company whether such a policy was available.”
39.	Master Rogers referred to the Court of Appeal’s decision in Sarwar v Alam and to the decisions of Master Gordon-Saker and His Honour Judge Lindsay QC in Cochrane v Chauffeurs of Birmingham and the decision of District Judge Hickman in Lorna Robinson v Alan Doselle. 
40.	He said: 
“61.	I accept the clear conclusion from Mr Bennett’s uncontradicted evidence that the state of knowledge of solicitors specialising in this field in the summer of 2004 was not that the defendants to a claim of this nature might have passenger cover, and in particular that such cover would be dealt with independently of any claim made against them by the passenger.
62.	In her oral submissions Ms Butler-Cole suggested that it would have been difficult to contradict such evidence, but, in my judgment, that is not so.  However, she also submitted that even if such evidence was adduced, the Court faced with a conflict of witness statements would still have to make a decision as to reasonableness.
63.	The Defendants, presumably, act for insurers of public service vehicles, notably buses, which would necessarily involve a substantial number of claims, and certainly more claims than any individual claimant’s solicitor would be likely to encounter. 
64.	If, therefore, there was evidence that it was general knowledge in July 2004 that that such cover existed, one would have expected the Defendants to have put in evidence to that effect.
65.	I consider that this is the vital distinction between this case and the case of Cochrane, but, even if I am wrong about that, I would not follow the decision of Master Gordon-Saker, notwithstanding what is said about it on the appeal by His Honour Judge Lindsay. 
66.	Accordingly, I find that there has been no breach of either Regulation 4(2)(c) or 4(2)(d) of CFAR 2000, and that this CFA is accordingly valid and enforceable.”
41.	In my judgment the Defendant has raised a genuine issue and I consider that the Claimant’s solicitors in this case have failed to comply with Regulation 4(2)(c) of the Conditional Fee Agreements Regulations 2000.   Whether or not it was common knowledge in the industry at the date the conditional fee agreement was signed (14 April 2005) that a bus company would have applied legal expenses insurance to the passengers on a bus to sue itself, it certainly was common knowledge that motor insurance policies frequently provide insurance cover for passengers to enable them to sue the driver.   This is clear from Sarwar v Alam where the judgment of the Court of Appeal was given in 2001.   In my judgment there is no justification for making a distinction between private motor insurance policies and insurance policies taken out by the operators of public vehicles such as buses.   
42.	In paragraph 55 of his judgment in Garrett v Halton Borough Council Dyson LJ said: 
“It is common ground that, in order to discharge the obligation to inform the client whether the solicitor “considers” that the risk of costs is already covered by a BTE, the solicitor must ask the client one or more questions.  That is obviously right.  It is implicit in the regulation that the solicitor must take steps to ascertain what the insurance position is, in order to be in a position to say whether he considers that the client’s risk of costs is already insured.  To some extent, the solicitor is bound to rely on the client for this purpose.  In our judgment, he is required to do no more than take reasonable steps.  What is reasonable will depend on all the circumstances of the case.”
43.	Regulation 4(2)(c) requires the legal representative to consider whether the client’s risk of incurring a liability for costs is insured against under an existing contract of insurance.  The regulation does not confine the enquiry to policies of insurance taken out by the client and, in my judgment, the enquiry should include the possibility that there may be a policy taken out by the proposed defendant which may protect the client.   The solicitor is required (as Dyson LJ said) to do no more than take reasonable steps and what is reasonable will depend on the circumstances of the case.    In the present case the Claimant’s solicitors knew (or ought to have known because of the Court of Appeal’s decision in Sarwar) that private motor insurance policies often contained provisions which protect passengers.   They ought also to have anticipated that in the case of public vehicles (such as buses) there could be similar provisions in the insurance policies taken out by the operators of such vehicles.  They should have taken reasonable steps (a letter or two would have sufficed) to enquire.   However they did not do this.   This had led them to be in breach of Regulation 4(2)(c). 
44.	In my judgment the breach of Regulation 4(2)(c) was a material breach because the Claimant was denied the opportunity of deciding, with the benefit of her solicitor’s advice, whether or not to rely on any policy which the Defendant might have had.   It does not matter that she may well have decided not to rely on such a policy.  Regulation 4(2)(c) was intended to afford protection to the client.     As Brooke LJ said in the judgment of the court in Hollins v Russell:
“107.	The key question, therefore, is whether the conditions applicable to the CFA by virtue of Section 58 of the 1990 Act have been sufficiently complied with in the light of their purposes.   Costs Judges should accordingly ask themselves the following question: 
“Has the particular departure from a regulation pursuant to Section 58(3)(c) of the 1990 Act or a requirement in Section 58, either on its own or in conjunction with any other such departure in this case, had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice?”
If the answer is “yes” the conditions have not been satisfied.   If the answer is “no” then the departure is immaterial and (assuming that there is no other reason to conclude otherwise) the conditions have been satisfied.”
45.	The consequence is that, it having been found that there was a material breach of Regulation 4(2)(c), the Claimant is unable to recover her solicitors’ profit costs from the Defendant because the Claimant is under no obligation to pay those profit costs to her solicitors.